Production was slightly lower than last year - drought in 4Q 2005-6 affected production in the current year - but the resulting higher US$ prices - in spite of the strong KShs - helped boost profits substantially.

Profits from "associates" (including Kapchorua also a large scale Tea Grower) & a substantial gain in "Biological assets" further boosted the bottomline.

Other Investments include 8 floors of Williamson House in Upper Hill. They also invested KShs 24 Million into their farms, KShs 55 Million in "other investments". Plenty of "extra" cash also reduced their net finance costs.

The short rains will help production get back on track in 2H but the strong KShs (vs US$) will hurt. Strong tourist arrivals, commodity exports & diaspora inflows has kept the KShs at the 70/- level.

It will be interesting to see the effects on the forex markets as interest rates fall on Kenya Government Treasuries. The election rhetoric is increasing at a blistering pace as we go into an election year. "Land Distribution" complaints & ethnic clashes come to the fore during this period as politicians blame everyone else for the problems except themselves.

Regardless, if the rains remain steady for the remainder of the year (2006-7), WTK could have a break-even 2H, and will probably match 2004-5 dividend of KES 5/- per share.

Excuses to maintain the status quo abound BUT they are flawed. KPA is used as a political tool to provide jobs to the favoured few.

Mombasa can cement its reputation as THE PORT for East & Central Africa. South Sudan has the potential to become a huge exporter (oil & minerals) using Mombasa as their route to other countries esp China & India.

Investors will line up if the government floats KPA shares on the Nairobi Stock Exchange since the Port is profitable & has growth prospects.

The "good news" as reported in the Standard:

The Kenya Ports Authority (KPA) has again cast its net wide in Asia for technology and expertise necessary to lift the operational standards at the Mombasa port. The latest strategy is twinning with one of the six high-performing ports in Asia — Port Klang in Malaysia. After a year of talks, Mombasa port finally signed a Memorandum of Understanding (MoU) with the Asian port last Monday.

Apart from Port Klang, Malaysia also has Penang Port, Johor Port, Port of Tanjung Pelepas, Kuantan Port, Kemaman Port and Bintulu Port which are run by private operators under the supervision of port authorities. The Malaysian government’s policy on ports focuses on the provision of ample capacity in ports to ensure that there is no congestion.

Port Klang has developed a super infrastructure for free trade zone that mainly facilitates commercial activities within the port similar to those at Jabal Ali in Dubai, hence increasing cargo volumes.

KPA, Kenya & Mombasa can become a HUGE trade zone by creating a better business environment for African businesses. Mombasa can become the "Dubai" of Africa with superb natural beaches & game parks.

Phang said her country has successfully privatised its six ports and developed a multi-million dollar free trade zone at Port Klang which has increased cargo volumes. She said Mombasa port would benefit from sharing with the developed Malaysian ports but cautioned that privatisation should be given time.

The recent privatisation of KR will lead to efficiency gains thus they will need additional cargo for their network. KPA can benefit from this by providing as much cargo throughput as KR can handle.

If the pipeline is expanded then expect the throughput of oil products to increase to S. Sudan & Central Africa. If Uganda strikes it huge in Lake Alberta (oil discovery?) - perhaps it can be exported using Mombasa.

KPC also needs to be privatised. They have misplaced priorities by building an over-priced HQ instead of using the funds to extend the pipeline to Kisumu! They lack adequate storage facilities in Nairobi & Mombasa. Thus Kenyan Oil Marketers (e.g. Kenol) can't build their market share in Central Africa since they don't have the product to sell.

Kenyan jails are no Club Med... can't the accused sue?Is the magistrate going on vacation for 2 weeks that she can't write the judgement?

Oh, talking of more WTF... why are "minimum" fees set for lawyers?There should be "suggested" guidelines but NOT minimum fees which ends up screwing the poor folk!

What happened to COMPETITION...???

Instead of reducing mortgage costs, the use of lawyers in Kenya instead of STANDARD MORTGAGE DOCUMENTS make house ownership much more expensive!

For preparation of mortgages, advocates will charge a fee of Sh62,500 for a property valued at Sh2.5 million. However, for a property worth Sh500 million, the advocate will get Sh2.7 million. (Source: Daily Nation 29 Nov 2006)

For most house buyers this is 2.5%... The buyer who borrows 75% Loan-to-Value pays approx 5% ABOVE the price of the house for the closing costs!

Who pays the commission to the sales agent?

I try to be positive about Kenya but it is every man for himself... the rich get richer.... the lawyers lobby the CJ to raise their MINIMUM FEES... Of course, the CJ who probably has a tax-free salary, tax-free allowances & huge retirement benefits doesn't care!

At this rate... who will want to invest in Kenya for the long-term?

In the USA, borrowing costs are lower since:

Documents are standardised

Loans are packaged & traded thus lowering rates

Attorney fees range between $250-600 on most home purchases

A Kenyan who buys a KES 2.5 Million ($35,000) house pays KES 62,500 ($900) to the lawyer while a US homebuyer pays $250 for $100,000 house! You can buy a $1,000,000 house & pay the attorney $600! Even ALL your closing costs amount to a pittance compared to Kenya!

Monday, November 27, 2006

Are these Potholes I see?As many of you are aware that Google Maps provides excellent views of Kenya esp the major towns - in spite of silly/out-dated laws that "prohibit" such images! - so I zoomed onto Kisumu to check out the runway!Well, the photo/image seems dated i.e. taken prior to the recent heavy rains but there seem to be POTHOLES on the runway which led to KQ suspending flights about 1 month ago.The airport is tiny... but has potential if the KAA can get its act together...The Google Map link might take a while to load depending on your connection speed but enjoy!If you can't find it on Google Maps, then try this alternate site that also uses Google Maps but "leads" you directly to the airport as long as you continue zooming in. You will need to the satellite/hybrid option.

Saturday, November 25, 2006

The airport has been in the news for the past one month due to the poor condition of its runway, which forced Kenya Airways to suspend flights citing potholes on the runway.

Mr Titus Naikuni, the Kenya Airways chief executive, said the runway was dangerous for both landing and take off. Earlier, the acting Kisumu airport manager, Mr Leonard Rinchuni, had denied the claim saying the airport's runway was in perfect condition and that it did not warrant KA's suspension of flights.

KAA should be eliminated. The airports should be privatised as is common in many stronger economies including UK & Australia. I say give over the airports to KQ (or some other PRIVATE entity) & you will see a HUGE difference in quality & performance over a relatively short period.

Wednesday, November 22, 2006

Vodafone Group of the UK yesterday admitted for the first time that some shares in Kenya's leading mobile phone provider Safaricom are held by another company.

It has been reported as such in the Annual Report among other filings since 2003. Vodafone is a UK publicly listed firm, they had to "show" their hand! If it was a Chinese firm, we would have NEVER found out! The Chinese are the perfect partners for corrupt African politicians!

But the owners of five percent of Safaricom remain a mystery as Vodafone refused to release any details.

Not their responsibility BUT Vodafone should make a PUBLIC disclosure since this is bad for business! Furthermore the Kenyan government should make demand that Vodafone tell us what they know. If the Kenyan government does not OFFICIALLY demand the "truth" then Vodafone could go scot-free. Wako has never been one for the "truth" & ringera is a lame duck!

Vodafone confirmed that a company called Mobitelea Ventures Limited owns the other 5 per cent. "Vodafone Group Plc has a 35 per cent interest in Safaricom held through Vodafone Kenya Limited, a Kenyan holding company," said Mr Phillip Rhys, the company's official in charge of mergers and acquisitions in a statement sent to the Nation.

The other 60 per cent of Safaricom is held by Telkom Kenya. The government has recently been in negotiations with Vodafone which wanted to increase its stake.

The Government has been equally evasive about the identity of Safaricom's mystery shareholder.

This is where it gets interesting!Why is the Government stalling?Is this why the kanu & narc governments delayed the privatisation of Safaricom?Why did moi & kibaki have this meeting all of a sudden?

After the story was broken exclusively by the Nation's sister paper, The EastAfrican, Information and Communications minister Mutahi Kagwe said the government was not interested in the details of the Vodafone shares, but only in the 60 percent held by Telkom.

Kudos to the East African. WTF is kagwe talking about? If Vodaphone would paid $55 Million for 30%, then Kenya lost an additional $5.5 Million from Mobitelea's 10%. Something is FISHY. Some ex-kanu (& current NARC) members are involved!

Contacted by the Nation, Investment Secretary Ms Esther Koimett: "I am not aware. We have got no such information. I have no idea and I'm not sure if the information is true." She said the Treasury did not know of any other arrangement apart from a 2000 shareholders agreement that, she noted, could have been renegotiated to include a third shareholder.

Wow, what insight! I am gagging on this! I see someone hiding the family silver!

Telkom Kenya, the main shareholder in Kenya's biggest mobile company, was equally in the dark. Managing director Sammy Kirui said their records show that Safaricom has two shareholders, themselves and Vodafone. "That was the position in 2000 when Telkom's shares were unbundled . As far as we know, the shareholding portfolios remains that way," the MD said.

Well, he better do some more reading! He should push to "recover" the 5% since Telkom can use the extra cash from the sale! Telkom is borrowing money for its restructuring & the money is being stolen right under their noses!

But Mr Kagwe said that records at the Registrar of Societies showed that Telkom and Vodafone were the only two companies owning Safaricom. "There are only two shareholders, Telkom and Vodafone," he said.Well, someone is lying. Can't kagwe get the "ownership" details of Mobitelea?I am surprised awori isn't making one his idiotic statements to protect the thieves!

I am glad the Press is digging this stuff up even though I believe divorces are personal matters not for public consumption.

Many successful (real) businessmen have not made what gichuru has made while gichuru "earns/steals" this through a teetering parastatal! That is why I support privatisation.

Furthermore, I think having "foreign" management is a good thing! The managers can be Kenyan (e.g. Barclays, KQ, SCBK) but the "ultimate" management authority lies with someone else.

Why? Look at KQ where Naikuni has done a great job! Moi hated him. In 2003, the kibz' government tried to "install" their men BUT were roundly rejected by KLM & enlightened shareholders.

Back to gichuru- How much of his wealth is earned legitimately?- The government used to "crackdown" on foreign accounts for legitimate businesses e.g. tea exporters BUT left its cronies alone!- What did moi & cronies get from all this?- Turkwell Gorge has been linked to biwott.- If the reports of gichuru's shareholdings are true then investigate merali since Yana is a merali firm!

KPLC was milked dry to the bone during the 1997 elections while gichuru was MD. It is known that njenga karume (now in kibz government) was "induced" by gichuru (for kanu & moi) by getting a contract to supply over-priced transformers!

I am sure there are others out there who have this ill-gotten wealth.

There is the kenyatta family with thousands of acres of grabbed land.There is the moi family with thousands of acres of grabbed land among other shenanigans.There is the karume family with gains from political backroom deals.gichuru & his stolen billions!merali was a moi insider who got favourable treatment. Where did he really get his money & deals?I wonder where eddy njoroge is in all this?

Whereas , inadequate rainfall, & low water levels, at some dams forced the shut down of turbines e.g. Mtera, TZ never developed their MASSIVE coal deposits in the south. Why?

Tanzanian politicians & xenophobes consistently refuse to acknowledge that an economic alliance with Kenya will greatly benefit BOTH countries. They feel that SADC has more to offer than a resurgent EAC.

An electricity grid linked with Kenya's grid would provide BOTH countries with the ability to sell/trade surplus electricity. Furthermore, Kenya (through the semi-privatised KenGen) is fast developing alternate sources - geothermal & baggasse - to keep up with the increased demand as well as maintaining "excess" thermal capacity.

Kenya experienced good rains since April 2006 & has surplus capacity, which may be sold to Uganda. Kenya could have sold the excess to the (northern) Tanzanians had they cooperated with Kenya in connecting the grid.

Northern Tanzania is a natural extension of southern Kenya (& vice versa) including the electricity grid, road & rail network and petroleum supply (pipeline). Just look at the National Parks (Masai Mara & Serengeti) or the Masai who live on either side of the border!

Northern TZ has better roads than Kenya but the rest of the infrastructure is of inferior quality. It makes business sense for KenGen/KPLC to extend the network to TZ since it provides both a source & market for electricity.

KPC should (if TZ agrees) to extend the pipeline to Arusha. If KPC is privatised, I expect the pipeline to reach Kampala, possibly Rwanda, so why not Mwanza? Arusha & Mwanza could do with a shot in the arm since they are among Tanzania's largest commerical centers.

Connecting the road network (Kenya needs to do much more on it side) & removing trade barriers will lead to increased cross-border trade esp for fresh fruits & vegetables from TZ to Kenyan towns & lodges.

Mombasa can act as a much more efficient port for TZ users if the rail network is extended to northern TZ. With the recent privatization of KR, it need not cost either government much - since the private sector will pay for it - BUT the benefits are substantial!

Since TZ industries are crippled, as I argued in an earlier blog, the Kenya government needs to turn a blind eye to Kenyan traders who are "exporting" goods to TZ. Let Kenyans "smuggle" local goods e.g. cooking oils, fats, soap, tyres, mabati, etc to the northern TZ. These are essential goods for the Tanzanians while Kenyan industries can get a huge boost.

Kenya needs to improve the roads leading to the Kenya/TZ border. Let the traders figure out how to get the goods from Kenya into TZ. They will find a way... In the meantime, Kenya's factories can start churning out more goods for export!

Friday, November 17, 2006

Friedman studied, and later taught, at the University of Chicago was a Keynesian at first but then took a different view. According to Friedman, inflation was a monetary phenomenon i.e. when money supply outpaced output = inflation.

One of his best known works is the Theory of the Consumption Function, which says that people's spending habits are shaped by their expectations of future ("permanent") income rather than their current income.

He was very influential in the Reagan Administration since he was a member of President Reagan's Economic Policy Advisory Board. Ben Benarke (current Federl Reserve Chairman) is widely thought to be a Monetarist.

China supposedly has the lowest wages in the world but it gets worse when the underpaid & overworked are considered in the equation.

China has an aging population that produced more boys than girls after the implementation of One-child Policy. Nevertheless, China's current population still stands at a massive 1.3 Billion people - Kenya has 33 Million.

Other countries stand to gain after 30 years when the population ages & there aren't enough "replacements" for the current generation of workers.

An interesting observation made by a very smart gentleman I know was that many Chinese will have to move back to the rural areas to take care of their parents thus depleting the ranks of factory workers even further.

The beneficiaries will be the countries surrounding China and perhaps the African nations.

Nevertheless, the juggernaut is almost unstoppable for now & Africa needs to become more competitive.

Telkom Kenya has signed a Sh5.7 billion pact with Etisalat of Dubai paving the way for the construction of an undersea cable linking Mombasa to Fujairah in the United Arab Emirates.

I hope they can complete it by Dec 2007 (they do say Nov 2007 so I am giving them one more month!) just in time to broadcast Kenya's elections' information!

The construction and supply contract will be awarded early next year and the project, dubbed The East African Marine System (Teams), will be ready by November, according to a joint statement issued by both parties from Dubai. Kenya will have a 40 per cent holding in the project, Etisalat 20 and the remaining will go to investors in the East African region.

I hope they can float shares in such a venture since it allows Kenyans to participate from the ground up in a wonderful project that will show excellent returns if managed well!

A public offer would also open it up to scrutiny thus preventing any shenanigans regarding "corruption"... I hope the "Anglo-Fleecing" crowd are not involved!

Information and Communications permanent secretary Bitange Ndemo said in a statement from Dubai that the deal would create work opportunities for Kenyans especially in the outsourcing business.

Absolutely... Hopefully, we can get some of the jobs going to India! Apart from BPO work there is an expanded scope for IT professionals in Kenya!

Finer details of the pact remained sketchy since Dr Ndemo and the minister, Mr Mutahi Kagwe, are in Dubai.

I hope the Press are all over this story... In fact, Kagwe & Ndemo should give an interview to the bloggers!

The deal comes at a time when Kenya and 15 other African countries are locked in a dispute over the ownership and financing of a separate undersea cable that is set to run from Mtunzini, South Africa, to Mombasa. The under sea cable, commonly known as EASSY project, was started in 2003 by the World Bank at a cost of Sh14.4 billion but has been dogged by controversy with several member countries accusing South Africa of trying to hijack it.

Forget the S.Africans... We are not part of SADC but can create a common bloc with Uganda, Rwanda, Zaire, Burundi & S.Sudan. Note that Tanzania think its closer to S.Africa than to Kenya. Let them be!

EASSY is aimed at connecting eastern and southern African countries through fibre optic cable system to the rest of the world. Dr Ndemo, however, emphasised that Kenya would not abandon the EASSY project, arguing that the Government had invested time and money in it.

Why not pull out of EASSY? Just write it off until the S.Africans come back with a better offer. It's always good to have a backup in EASSy if TEAMS goes down for any reason.

The PS added that the Dubai deal had come about because of delays in concluding the EASSY project, which had made the country miss "huge" business opportunities. "From our estimates, EASSY will take too long to start and may not even take off and that would be a huge risk for our country," Dr Ndemo said, adding that the favourable pricing of the Dubai deal, which came at nearly a third of the EASSY project, would put Kenya in a good position to compete with India and Philippines for the lucrative outsourcing business.

YES... Maybe NARC-K does deserve my vote! If they can get TEAMS up & running by Nov 2007, they will have made a serious effort to earn Kenyan votes!

"The pricing with EASSY does not have these considerations and as a country we need to spur growth with a cheaper bandwidth," Dr Ndemo said.

I am so glad to hear this news... now make it REALITY... India is no longer the cheapest source for BPO & other countries can start chipping away at their dominance.

The gain in BPO jobs will have a positive knock-on effect on other sectors including IT, telecommunications & finance.

I had reviewed some websites that I felt provided "missing" information on stocks as well as stockmarkets in Africa.

Anyway, I beat out Barrons! Yahooooo!

Barrons, a prominent national Finance weekly paper in the USA is published by the folks of the Wall Street Journal, quoted Ryan Shen-Hoover of the newletter Investing In Africa. This is a pan-African newsletter thus covers more than just Kenya.

For all the "flaws" in Africa, Africa is a real diamond in the rough... we just need to make the right cuts & then polish it just right... Investing In Africa is like the miner who dsicovers the stones for you!

To my original list I shall add... Jijini Markets. They need to work in more features.

I can't say enough good things about www.eight.co.ke who are far ahead of their competitors with their 15 minute updates... I wish the NSE would "copy" what these entrepreneurs are doing... OR co-opt them... after all it can only help!

The Eveready OFS (not an IPO since no funds are being raised by Eveready) has started picking up steam 3 days into the offer. The propectus came out on Friday (10 Nov 2006) which was one business day prior to the offer being opened.

The intial reaction was not enthusiastic since only 63 Million shares worth KES 600 Million are being sold. The reason was the allocation levels are expected to be low just like ScanGroup who sold 69 Million shares at 10.45.

In spite of the relatively high PE & low growth prospects, I feel the issue will be oversubscribed since there are many investors who like the price of 9.50.

Mumias OFS was supposed to have started on 1 Dec 2006 but there might be a dealy since we are almost in the Holiday season. Mumias will be more exciting since the govt will sell 92 Million shares. The price is unknown but expected to be sub-50 considering the price on the NSE is hovering at 52/-.

Back to Eveready... the refunds will not be issued until mid December so investors are cautious not to tie up their funds just in case of a massive oversubscription.

Regardless of the all the smokescreens about the real value of a split, the Kenyan retail investor seemingly loves bonuses & splits!

There seems to be a pattern of share prices rising in anticipation of a split. The price hits a new high & the company splits the shares to make them more affordable!All that has happened is that some folks who owned the shares BEFORE the rally increase the value of their paper holdings.

KCB & SCBK profits & share prices are at record levels even though they did not announce a bonus or split.

Even laggards like NBK have shown a modest but commendable growth in profitability.

It seems the banks have a better handle on bad debts especially KCB & NBK which suffered from poor loan quality due to political lending.

Bankelele normally does a summary of Banks' profits. Since all banks are required by law to publish quarterly results within 60 days, we can expect other banks to report within the next 3 weeks.

I expect most private & listed banks to continue reporting good profits through 3Q 2006. The elections are in 2007 & it will be an interesting time for banks to competitively grow their asset base.

Competition is heating up for banks as more banks (notably Barclays) targets the "underbanked" population. This puts the larger banks (BBK & KCB) in direct competition with Equity Bank & Family Finance.

Furthmore, there are numerous smaller credit firms that will bear the brunt of the big boys as competition intensifies.

I think the increased competition will benefit Kenyans in the next few years as there will be:

Monday, November 06, 2006

Instinctively, I blamed the Oil Marketers for the high price of petrol but as I delve deeper I realise they are as much victims as the consumers!

As mentioned in my previous post, IMHO is blowing hot air regarding petrol prices. Finally, an Oil Marketer (Kenol/Kobil) has come out fighting the bullying government, putting the record straight while exposing us to the morass that is tax collection.

The Oil Marketers are arguing that since the government's taxes & levies constitute an increasing percentage (40% at the minimum) of the price of Petrol, the government should reduce its profligate ways.

The link below shows 70% of EABL's revenues go to the government in the form of taxes & levies. The government makes 3.3x what the shareholders get!Essentially, for 100/- EABL gets from the sale of beer, the goverment gets 70/- without doing much! Not 70% of profits but 70% of REVENUES.... What a scam!

Refining crude at the Mombasa refinery is mandatory and oil firms must refine at least 70 per cent of their requirements at the facility, under the Baseoad Rule.Kinyua (Kenol-Kobil), however, pointed that two months ago, Kenya Petroleum Refineries Ltd increased its basic refining fee for crude oil processing from $1.75 to $2.15 per barrel, an increase of 22 per cent.

Kimunya (govt stooge) never mentions that the inefficient KPRL gets more for doing less while we (taxpayers) end up footing the bill. How & why is KPRL allowed to charge more for refining? Isn't this a subsidy for an inefficient refiner?Why should taxpayers have to pay for it?Who owns KPRL?Isn't this monopolistic behaviour?

He said the adjustment followed an earlier increase last year by Kenya Pipeline Company (KPC) for its charges at the Kipevu Oil Storage Facility from $2 to $3 per cubic metre.

A subsidy for a government owned entity that is mired in scandal. The KACC wants to confiscate the MD's passport.They now "own" a KES 1 Billion building instead of investing in upgrading the pipeline! Wrong priorities!The road leading to the Fuel Depot in Nairobi is pathetic (& leads to dangerous situations) but they spend KES 1 Billion on an office building!

BTW, isn't this monopolistic behaviour?What remedies do we have to reduce the costs inmposed on us as consumers?

Collection of taxes upfront since August last year and delayed tax refunds, he pointed out, had increased the cost of doing business.

So Oil Marketers (via the consumers) further subsidise the government! No wonder the government collection targets are so rosy since they do not refund the money!Why should consumers have to pay for the excesses (bonuses, perks, outsized salaries, cars of the MPs & ministers?Why do ministers who STEAL by overinflating their mileage allowances get to go scot-free?If I file my taxes late, I am penalised but is it OK if the government REFUSES to refund my money?